Brand New Ray Dalio Essay: The Big Cycle of the United States and the Dollar

[Smith1776]

Brand new (as of July 16th) essay from Ray Dalio. I haven't read it in-depth yet, but I've done a quick scan and it seems valuable and insightful as always.

I'm always stoked to read what Dalio has to say.

https://www.linkedin.com/pulse/chapter- ... CJD0LBLqqA


Interesting graph of the "Big Cycle"

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[Smith1776]

We must be between the 'Printing Money' phase and the 'Revolution' phase right now.

It certainly seems that way.

More and more I believe that Dalio was right about how people see the economy "too up close". Everyday experience and short-term cycles tend to dominate thinking. Little do many investors know, there are fairly regular and mechanical events that happen cyclically, outside of our typical time frames. The supposed black swan event is really just the earthquake that happens once every hundred years in a seismically active region. It happens frequently enough that one should be prepared, but not so frequently that people are prepared.

[Libertarian666]

We must be between the 'Printing Money' phase and the 'Revolution' phase right now.

It certainly seems that way.

More and more I believe that Dalio was right about how people see the economy "too up close". Everyday experience and short-term cycles tend to dominate thinking. Little do many investors know, there are fairly regular and mechanical events that happen cyclically, outside of our typical time frames. The supposed black swan event is really just the earthquake that happens once every hundred years in a seismically active region. It happens frequently enough that one should be prepared, but not so frequently that people are prepared.

Right. Most "black swans" aren't black at all.
Wait, can we still refer to black swans? I assume that must be racist!

[pp4me]

We must be between the 'Printing Money' phase and the 'Revolution' phase right now.

The revolution seems already underway to me, we are taking on a staggering amount of debt due to Covid, and if the Dems take the reigns next year they are promising political restructuring like we've never seen before.

So I would have to move us one step lower to the bottom on that chart.

And I was hoping to live my life in peace and pass those gold coins on to my children.

[Libertarian666]

We must be between the 'Printing Money' phase and the 'Revolution' phase right now.

The revolution seems already underway to me, we are taking on a staggering amount of debt due to Covid, and if the Dems take the reigns next year they are promising political restructuring like we've never seen before.

So I would have to move us one step lower to the bottom on that chart.

And I was hoping to live my life in peace and pass those gold coins on to my children.

If the Dems get into power, they will make sure they never lose it again.
That will be the end of the Republic, or what's left of it.

[Smith1776]

If the Dems get into power, they will make sure they never lose it again.
That will be the end of the Republic, or what's left of it.

“What have you given us, Mr. Franklin?”

[Kriegsspiel]

Meandering thoughts: His graph implies is that humans suck at understanding debt, and they've always sucked at it. Understanding "owing someone" is natural, but borrowing money outside of a social context seems to always lead to bad things. Like a regression to the mean. So when a civilization coelesces, people in it trust each other and feel safe lending each other money. And as it goes on people get more cynical (is that the right word) about how they deal with money. Eventually the civilization collapses. The next one rises up when people trust each other enough to do things and have people "owe them" in some way, since that's how prosperity works.

[Smith1776]

Meandering thoughts: His graph implies is that humans suck at understanding debt, and they've always sucked at it. Understanding "owing someone" is natural, but borrowing money outside of a social context seems to always lead to bad things. Like a regression to the mean. So when a civilization coelesces, people in it trust each other and feel safe lending each other money. And as it goes on people get more cynical (is that the right word) about how they deal with money. Eventually the civilization collapses. The next one rises up when people trust each other enough to do things and have people "owe them" in some way, since that's how prosperity works.

I like your analysis. What I'd add is that when the next world order rises the system resets with a consolidation around gold in order to regain the lost trust.

[Libertarian666]

Meandering thoughts: His graph implies is that humans suck at understanding debt, and they've always sucked at it. Understanding "owing someone" is natural, but borrowing money outside of a social context seems to always lead to bad things. Like a regression to the mean. So when a civilization coelesces, people in it trust each other and feel safe lending each other money. And as it goes on people get more cynical (is that the right word) about how they deal with money. Eventually the civilization collapses. The next one rises up when people trust each other enough to do things and have people "owe them" in some way, since that's how prosperity works.

I like your analysis. What I'd add is that when the next world order rises the system resets with a consolidation around gold in order to regain the lost trust.

Sure, it's worked that way for thousands of years.
<Knucklehead>But this time it's different!</Knucklehead>

[Smith1776]

The Big Cycle of the United States and the Dollar, Part 2 is out today!

https://www.linkedin.com/pulse/big-cycl ... ray-dalio/

Ideologically, the US-led world was capitalist and democratic while the Soviet-led world was communist and autocratic. The US-led monetary system for the US-led countries linked the dollar to gold and most other countries’ currencies were tied to the dollar. This system was followed by over 40 countries. Because the US had around two-thirds of the world’s gold then and because the US was much more powerful economically and militarily than any other country, this monetary system has worked best and carried on until now. The Soviet Union and those countries that were brought into the Soviet Union’s bloc were much less rich and were built on a much weaker foundation.

[Smith1776]

Some hard hitting stuff:

Where the US Is in Its Big Cycle

I think we know roughly where it is.

...

The stats seem to suggest that the US is roughly 75% through that cycle, +/- 10%.

Is it reversible?

Most world powers that experience this cycle have their “time in the sun,” which is brought about by the uniqueness of their circumstances and the nature of their character and culture (i.e., they have to have the essential elements to work hard and smart, be disciplined, become educated, etc.) and have their decline phases continue through them slipping into relative obscurity. Some do this decline traumatically, and some do it gracefully.